Surge in Turkey’s Inflation: Finance Minister Reassures Public and Investors Amid Concerns over Unorthodox Economic Policies

In May 2024, Turkey’s annual consumer inflation rate surpassed 75%, the highest it has been in the past 18 months, according to official data released on Monday. The surge in inflation was driven by rising prices in the education, housing, and restaurant sectors, as reported by the Turkish Statistical Institute. Despite this alarming news, Turkey’s Finance and Economy Minister Mehmet Simsek reassured the public and international investors by stating that “the worst is over.” He expressed confidence that the country is transitioning from high inflation to a disinflation process, with the expectation that annual inflation will drop below 50% by the end of the third quarter of 2024.

After implementing aggressive interest rate hikes from 8.5% to 50% between June 2023 and March 2024, Turkey’s Central Bank had previously predicted a year-end inflation rate of 38%. However, after recent adjustments to its projections from 36%, its target for 2025 remains at 14%. Under President Recep Tayyip Erdogan’s leadership, Turkey pursued unorthodox economic policies such as keeping interest rates low despite high inflation.

Despite maintaining interest rates at 50% in April and May, Turkey’s Central Bank emphasized its commitment to tightening monetary policy further if there are signs of inflation worsening. The recent inflation figures and central bank actions indicate a shift towards more orthodox economic measures in Turkey to address rising inflation pressures.

In May of last year (May 2023), the year-on-year inflation rate was recorded at 39.59%, but it jumped to an astonishing level of 75.45% in May of this year (May